The Forgotten Man

Readings in the Age of Empire

Franklin Delano Roosevelt has two principal
legacies: the New Deal and World War II. The latter would have occurred even
had he never been elected president, though America might not have intervened
in the conflict, or had it done so, might have focused on Europe while avoiding
war with Japan.

The New Deal, however, was entirely Roosevelt's creation. And, as Amity
Shlaes demonstrates in her spritely written The Forgotten Man, the Roosevelt
program was deeply flawed, actually lengthening America's economic downturn
while dramatically expanding government power and undermining constitutional
governance. As such, the New Deal continues to malform American politics today.

There
is a "standard history of the Great Depression," writes Shlaes, a long-time
newspaper editor and columnist. Greed in the 1920s led to economic collapse.
Herbert Hoover failed by opposing necessary government action. Roosevelt saved
America, and capitalism, by engaging in massive federal spending, intrusive
government regulation, and national social engineering. This standard history,
along with the usual conservative rebuttal, is largely inaccurate, argues Shlaes.

The title, The Forgotten Man, stems from William Graham Sumner's
essay by the same name, citing the man, C, who always pays and suffers as a
result of the efforts of A and B to help X. In Sumner's words, C was "the man
who never is thought of" even as he is conscripted in the grand reform schemes
of others.

Roosevelt picked up on the rhetoric of the forgotten man, but applied it
to those he believed required government aid. Which was pretty much everyone.

Shlaes explores the early history of the Roosevelt years, offering an important
perspective ignored by more traditional historians. The first "reality," as
Shlaes calls it, "was that the 1920s was a great decade of true economic gains,
a period whose strong positive aspects have been obscured by the troubles that
followed."

Although the stock market crash is identified with the Great Depression,
it did not cause economic collapse. The sharp fall in stock prices was an inevitable
response to an overinflated market – think housing prices today. A "correction,"
is it is so often called, ultimately was necessary for sustained growth to recur.

More relevant to causing and deepening the Depression, in Shlaes view,
was the fact that neither Hoover nor Roosevelt understood the problem of deflation.
It's an issue that the great free market economist Milton Friedman also highlighted
when pointing to the Federal Reserve's damaging contraction of the money supply
prior to America's economic implosion.

Unfortunately, Hoover worsened the economic downturn precisely because
he was a market meddler, not a laissez-faire advocate. Indeed, Shlaes nicely
contrasts Hoover with his predecessor, Calvin Coolidge, as well as Treasury
Secretary Andrew Mellon. Hoover signed the Smoot-Hawley Tariff, which destroyed
international demand for American products. He also pushed businesses to prop
up wages and prices, which impeded market adjustments to strikingly new economic
conditions. These policies were "dramatically counterproductive," as Shlaes
politely puts it.

Unfortunately, nothing much changed under Roosevelt. Indeed, he succeeded
politically even as he failed economically. Contrary to pop history, there was
no quick rebound after his election. His jaunty optimism could not make up for
the mass of contradictory policies, topped by misguided attempts to fix prices
and production.

Particularly harmful was Roosevelt's sustained attack, through both rhetoric
and policy, on business, wealth, profits, utilities, and private property. On
this front Roosevelt started early and steadily expanded operations. By 1935,
notes Shlaes, "The skirmishes were over; the class war was out in the open."

While there was corruption and other misbehavior in the 1920s like during
every other period in American history, they had little to do with the onset
of the Great Depression. But by demonizing his favorite economic scapegoats,
Roosevelt ended up cutting business revenues, diminishing profit prospects,
reducing property security, and creating economic uncertainty. This discouraged
corporate managers from expanding old enterprises and business entrepreneurs
from establishing new ones. Thus, the persistence of the Great Depression should
come as no surprise. Roosevelt's strategy won votes, at least in the short-term,
but impoverished the American people.

In fact, the modest early recovery, notes Shlaes, was cut short by another
crash, "a depression within the Depression. It was occurring five years after
Franklin Roosevelt was first elected, and four and a half years after Roosevelt
introduced the New Deal. It was taking place eight years after President Herbert
Hoover first made his own rescue plans following the 1929 stock market crash.
Washington had already made thousands of efforts to help the economy, yet those
efforts had not brought prosperity."

So bad was the economy that at any other time the incumbent president likely
would have been defeated. Roosevelt was saved by war. The Republicans made significant
congressional and gubernatorial gains in 1938. In 1940 Wendell Willkie, a former
utility executive, "polled 22 million votes, more than any Republican in history,
even more than Hoover in 1928," notes Shlaes. But it was not enough. With war
raging in Europe, a conflict to which the U.S. seemed increasingly drawn, voters
stuck with the more experienced candidate.

The Forgotten Man is more descriptive than judgmental, a thoughtful
history that allows readers to draw their own conclusions about the New Deal.
But free of the starry-eyed admiration of many biographers, Shlaes presents
the dark practical undercurrents to the rhetorical flights of fancy that characterized
Roosevelt and the New Deal. As a result, it is difficult to escape the conclusion
that while Roosevelt might have restored people's optimism, he undermined their
productivity.

Indeed, perhaps the most important judgment offered by Shlaes – admittedly
not original to her, but zealously avoided by Roosevelt idolaters – is how similar
Hoover and Roosevelt were in practice. She writes:

"Both preferred to control events and people. Both underestimated the
strength of the American economy. Both doubted its ability to right itself
in a storm. Roosevelt offered rhetorical optimism, but pessimism underlay
his policies. Though Americans associated Roosevelt with bounty, his insistent
emphasis on sharing – rationing, almost – betrayed a conviction that the country
had entered a permanent era of scarcity. Both presidents overestimated the
value of government planning. Hoover, the Quaker, favored the community
over the individual. Roosevelt, the Episcopalian, found laissez-faire economics
immoral and disturbingly un-Christian.

"And both men doctored the economy habitually. Hoover was a constitutionalist
and took pains to intervene within the rules – but his interventions were
substantial. Roosevelt cared little for constitutional niceties and believed
they blocked progress. His remedies were on a greater scale and often inspired
by socialist or fascist models abroad."

Unfortunately, while both Hoover and Roosevelt erred – proved wrong by the
failure of their programs to reinvigorate the American economy – their mistaken
visions live on in both the Republican and Democratic parties today. Both major
political parties promote economic intervention on a massive scale. Both political
parties push for ever more expansive federal power. And both political parties
seek to apply those policies to the entire world, using war, if necessary, to
advance their attempts at global social engineering.

The American people eventually turned away from the worst excesses of the
New Deal. It is time for the American people to again say no more.

Joshua Frank
is the author of Left Out!: How Liberals Helped Reelect George
W. Bush, just published by Common Courage Press. You can order
a copy at a discounted through Josh's blog at www.brickburner.org.
He can be reached at brickburner@gmail.com.

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